Key Information
HQ:
United States
Market Cap:
$210.57bn
Primary Markets:
North America, Asia, Europe & Russia, LATAM, Oceania, MENA
Meat Sourcing Engagement
Analysis Breakdown
Board oversight
Is the board briefed by management on the company’s strategies for mitigating environmental risks associated with their meat and dairy supply chains on at least an annual basis?
McDonald’s board has a Sustainability and Corporate Responsibility Committee that is formally focused on sustainability issues and this committee has a clear charter. However, it is unclear whether the board explicitly reviews climate and water risks linked to meat and dairy supply chains as opposed to reviewing sustainability risks in general.
*No change
Partial
Have company representatives presented to the Board on physical/transition risks from climate change impacts on commodity sourcing?
The company has conducted scenario modelling in line with TCFD on physical and transitional risks and opportunities in its supply chain. McDonald's discloses that its Sustainability & Corporate Responsibility Committee assists the Board of Directors in risk oversight, however, it is unclear whether any discussions of physical/transitional risks has taken place at Board-level. No information was found relating to water risks.
*No change
Partial
Supplier policy
Does the company have a publicly-available supplier policy that addresses the climate, deforestation, water use and quality impacts of its commodity suppliers?
The language in the Code of Conduct is high-level and states that suppliers are responsible for "managing, measuring and minimizing the environmental impact of their facilities" including air emissions, waste reduction, recovery and management, water use and disposal, and greenhouse gas emissions. However, the company does not disclose specific requirements for suppliers on these issues. McDonald's states that it has a Global Sustainable Sourcing Guide for suppliers, which includes requirements for climate action and water stewardship. However, this Guide is not publicly available.
*No change
Partial
Does the company have a supplier monitoring and verification system that ensures that direct and indirect suppliers meet the company’s environmental requirements?
The Code of Conduct and Supplier Guidance Document state that McDonald's reserves the right to audit compliance with the Code. It is unclear how the company actively monitors compliance.
*No change
Partial
Does the policy include a non-compliance protocol that specifies specific criteria (e.g. violation of no-deforestation pledge or major pollution incidents) that would trigger the suspension or termination of contracts and facilitates development of time-bound action plans for suppliers to return to compliance?
The Code of Conduct states that if a violation is identified, suppliers are expected take corrective actions promptly. However, it is unclear what specific criteria would trigger the termination of a business relationship and/or corrective actions.
*No change
Partial
Does the policy specify that suppliers address all major emissions sources, including those related to land use change and deforestation, enteric emissions from animals, and emissions from manure and chemical fertilisers?
McDonald's states that it will "collaborate" with suppliers to achieve its Scope 3 SBT but does not define specific requirements or terms for collaboration in its supplier policy. While McDonald's has a Scope 3 emissions reduction target that is a science-based target, it is unclear whether asking suppliers to set emission reduction targets that address major sources of GHGs is one of the actions that McDonald's will take to achieve this target. While there may be a ripple effect on suppliers, this is not made explicit in disclosure. McDonald's states that it engages suppliers on climate-related issues in 2 ways: information collection and education/incentivisation. Additionally, the company states that its climate action scorecard and supplier report encourages suppliers to "set targets", however, it is unclear whether this specifically includes setting targets that address major sources of GHGs. Disclosure on this has not changed since Phase 2 of this engagement.
*No change
No
Does the policy ask direct suppliers to measure, report and reduce the greenhouse gas emissions associated with their direct operations and agricultural supply chains?
McDonald's requires its top 131 suppliers to respond to CDP climate change and forests - up from 108 in 2020 disclosure. It is assumed that the rest of the suppliers should refer to the Supplier Guidance Document, which lays out the company's expectations and good practices on environmental management. However, the language specific to GHG in the guidance document is very focused on manufacturing facilities and does not seem to extend to agricultural production ("The facility has long term energy efficiency and GHG emission reduction goals").
*No change
Partial
Does the policy specify that direct and indirect suppliers address all major sources of water pollution and waste in the animal protein supply chain, including slaughtering and processing activities, animal production (CAFOs), and feed production?
While McDonald's indicates that suppliers should demonstrate leadership in the areas of water management, wastewater and effluents management, and groundwater pollution prevention, there is no explicit mention of addressing all major sources of water pollution and waste. Additionally, important to note that this is listed as "good practice", rather than a requirement.
*No change
Partial
Does the policy encourage suppliers to set science-based and/or context-based targets on water?
McDonald's Supplier Guidance Document indicates that suppliers should measure, reduce and report on water use and pollution. However, the language of the policy makes it seem like it does not extend to agricultural production and is very manufacturing facilities focused.
*No change
Partial
Does the policy ask direct suppliers to measure, reduce (beyond regulatory compliance levels) and report on the water quantity and quality impacts of their direct operations and agricultural supply chains?
The company does not disclose information in its supplier policy regarding context-based water targets. It "encourages" suppliers to draw upon internationally accepted standards that aim to advance social and environmental responsibility. Water management is considered "good practice".
*No change
Partial
Does the company have a time-bound, quantifiable zero deforestation/conversion-free policy that covers the entire supply chain for soy, cattle and palm commodities?
The company is a signatory to the New York Declaration on Forests which aims to end deforestation by 2030. The commitment applies to all raw material supply chains. The company had further committed to eliminating deforestation from beef, chicken (including soy in feed) and palm oil by the end of 2020.
The company reports on its progress for each commodity, but not against the full geographic scope or ambition of its zero-deforestation commitment. When reporting progress against its commitments, it reports progress against "supporting deforestation-free supply chains" rather than against zero-deforestation. The company reports 99.4% of its global beef supply supports deforestation-free supply chains, but only verifies deforestation-free compliance in high-priority regions of Brazil, Paraguay, Argentina and Australia. For soy in chicken feed, the company reports that 100% supports deforestation-free supply chains, and this covers all soy sourced by its chicken suppliers in all markets. For palm oil, the company reports 100% of its palm oil is now supports the production of sustainable palm oil and deforestation-free supply chains (ie RSPO or RTRS certified).
*No change
Partial
Targets
Has the company set a time-bound, quantitative reduction target for Scope 1 + Scope 2 GHG emissions?
McDonald’s has committed to setting an SBTi Net Zero target, and has a near term target of 2 degrees C by 2030. The company has committed to reducing greenhouse gas emissions in restaurants and offices by 36% by 2030 from a 2015 base year, a target which has been approved by the SBTi. Recent updates in SBTi target-setting requirements mean that only 1.5 degrees-aligned targets will be considered science-based, and the company states that it is in the process of aligning its existing SBTs to meet this new standard.
*No change
Yes
Has the company set a time-bound, quantitative emissions reduction target that explicitly address Scope 3 emissions?
As well as being committed to setting an SBTi Net Zero target, McDonald's currently has a science-based target of reducing emissions by 31% in its supply chain by 2030.
*No change
Yes
Has the company set time-bound quantitative targets to reduce water use in direct operations?
The company set a target to reduce water intensity by 20% by 2020. However, the company has not disclosed progress against this goal. The company discloses that it has achieved a 19% reduction of water use in its US 2020 Prototype stores, but this does not appear to reflect a company-wide reduction.
*No change
Partial
Has the company set time-bound quantitative targets to reduce water quality impacts in direct operations?
The company does not disclose targets of any kind on reduction of water quality impacts in direct operations.
*New category
No
Has the company set time-bound quantitative targets that explicitly address water use and quality impacts in the supply chain?
McDonald's does not have a water use target for its supply chain. The company states that its U.S. 2020 Supplier Facility Goals stated each facility should have environmental management system which meets internationally recognised standards, and it gave suppliers the option to choose between three "aspirational goals", one of which was to reduce water intensity by 20%. It is not disclosed whether suppliers chose this goal, or whether they met it. It is noted that McDonald's is partnering with experts such as WWF and WRI to identify risks and create a water stewardship approach that will drive actions and improvements across its entire value chain.
*No change
No
Risk assessment/Scenario analysis
Has the company committed to undertaking and publishing a scenario analysis in line with TCFD recommendations?
The company has conducted both qualitative and quantitative climate-related scenario analysis and uses both to inform its strategy. McDonald's states that it is conducting TCFD-aligned scenario modeling, which considers carbon taxes and water-related risks at restaurants and on "key commodities". Results have not yet been made public.
*No change
Yes
Has the company conducted a water risk assessment across its direct operations?
In 2020, McDonald's conducted a water risk assessment for its US market using the WRI Aqueduct Water Risk Atlas to identify areas in the country which are at high risk. However, the company has not made the results of the analysis public. The company states that it has conducted such analysis in "many" of its operating markets, but does not disclose which markets, therefore it is unclear whether all direct operations are assessed.
*No change
Yes
Has the company conducted a water risk assessment of suppliers & major commodities?
McDonald's has conducted a water risk assessment with WRI that spans the full value chain. However, the results of the assessment have not been published. The company is encouraged to publish the results. The company is conducting a physical risk scenario analysis around water, covering the entire supply chain including key agricultural commodities with the time horizon of 2030 for its restaurants and 2040 for its supply chain. No results are currently disclosed, but the company states that this analysis will inform how it determines further analysis and mitigation methods for risks in specific locations and commodities.
*No change
Yes
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Workstream Information
Last Updated:
14 June 2022
2022 Resources
Phase 3 | Progress Briefing Report Meat Sourcing Engagement